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Court Cuts

Frederick Wilmot-Smith

In his first speech as lord chancellor, Michael Gove warned of a ‘dangerous inequality’ in the justice system. There was, he said, a ‘gold standard’ for the wealthy and a ‘creaking, outdated system’ for everyone else. This, from a minister in a government that has made enormous cuts to legal aid, is a little like Orestes asking for mercy on account of his being an orphan. Even so, his diagnosis is correct. What should be done? Gove suggested that rich lawyers should do more pro bono work. That is a bad idea. City solicitors are trained in transactions, not asylum and immigration; instead of donating an hour of their time, they should pay an hour’s wages to a legal charity. The more fundamental question is who should bear the cost of providing a legal system. Should lawyers, for example, contribute more than bankers, footballers or other wealthy individuals? I doubt it, though the argument has been made in the past. ‘There exists a moral obligation on the part of the profession,’ the second Lawrence Report said in 1925, ‘in return for the monopoly in the practice of law which it enjoys, to render gratuitous legal assistance to those members of the community who cannot afford to pay for such assistance.’ The grain of truth here is that monopoly providers can owe special obligations. What about victims of injustice? Should they pay higher taxes to fund the legal system? The idea seems absurd.

Yet Section 180 of the Anti-Social Behaviour, Crime and Policing Act 2014 empowers the lord chancellor to prescribe ‘enhanced’ court fees. These are fees ‘intended to exceed the cost’ to the state of the use of the court. Fees, in other words, which ensure the courts turn a profit. As lord chancellor in the twilight of the last administration, Chris Grayling used section 180 to pass the Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015. This increases court fees for all litigants who bring claims estimated to be worth £10,000 or more. Before, fees were relatively modest; under the new regime, you must pay 5 per cent of the estimated value of your claim just to get into court. Importantly, not everyone pays 5 per cent: enhanced fees are capped at £10,000. So those claiming more than £200,000 – often the wealthiest individuals or corporations – pay less than 5 per cent. ‘Enhanced fees’ is sanitary language for a regressive tax on victims of injustice.

The increase in cost is, in some instances, more than 600 per cent. (A litigant claiming £190,000 in compensation for injury would, under the old regime, have paid £1315; now, she would have to pay £9500.) The government says the increase is ‘to protect access to justice’: the extra money brought in – they estimate £120 million a year – could in theory be used to subsidise some litigants. There is, however, no legal obligation to use the money in this way. The Act says the profits must be used to fund an ‘efficient and effective’ court system – which could mean putting the money towards the cost of new computers or cleaning offices. The government’s impact assessment – which Parliament’s Regulatory Policy Committee rated as ‘not fit for purpose’ – assumed that the increases would have ‘no detrimental impacts on court case outcomes nor on access to justice’. A letter from the lord chief justice, signed on behalf of the senior judiciary, calls these ‘very sweeping’ assumptions ‘unduly complacent’. The government also assumes, in defiance of elementary economics, that ‘fee changes will not affect court case volumes’; 61 per cent of respondents – chiefly law firms and barristers – to a government-commissioned study disagreed. The risk is not only that good claims will be deterred but that, as a result, the estimated £120 million won’t be raised. And the less money that is raised, the less there is to subsidise those unable to pay the fees – if that was ever even the aim.

Unlike most other litigation costs, these fees must be paid up front; if you can’t pay, your claim won’t be heard. But not everyone with a claim to a large sum of money has £10,000 lying idle. Indeed, they might not have the money precisely because they have a good claim. If a builder works on a project for six months but goes unpaid, his cash reserves will start to run dry. And his bargaining position is weakened by the changes: the high price of issuing a claim creates an incentive to settle for less than he is owed. Employment tribunals are a stark illustration of the risks. Since July 2013, employees have had to pay as much as £1200 to bring a claim. Applications fell by 70 per cent, allegations of sex discrimination by 91 per cent. The explanation given by the minister for the courts and legal aid, Shailesh Vara, was that employees – objecting, for instance, to discrimination or to their employer’s failure to pay the minimum wage – are no longer ‘simply trying it on’. He gave no evidence to support this inference; nor did Gove when, in his evidence to the Commons Justice Committee on 15 July, he implied that claimants had been ‘too promiscuous’ in their use of tribunals. These assertions, it turns out, can be tested: if fewer people are now ‘trying it on’, fewer people should be losing cases; in fact, the proportion of cases won at employment tribunals versus cases lost has remained the same, which means that as many good claims are being abandoned because of cost as weak ones.

In response to concerns that something similar would happen following the introduction of enhanced fees, Grayling wrote to the judge in charge of civil justice, Lord Dyson, promising to keep ‘the position under review’. This was an empty promise: the government doesn’t collect the sort of data needed to measure the effect of the changes. Gove told the Justice Committee that a ‘substantial reduction’ in the number of claims was not an ‘intrinsic’ reason to worry. He would be impressed only by ‘cases of rough justice’. He is unlikely to find these when potential litigants can’t afford to bring a claim in the first place.

Quite why 5 per cent of the expected value of the claim was deemed an appropriate measure is unclear. In its response to consultation, the government says that ‘those who agreed’ with the fee increase did so on the basis that the higher the value of the claim, the more it is likely to cost to resolve. Yet the annex (which few will have the time or patience to read) reveals that only one respondent agreed with the proposals for this reason; ‘many who disagreed argued that the proposed fees bore little relation to cost.’ The government also reasoned that 5 per cent is ‘proportionate to the sums in dispute’. This is a verbal trick. The fee is (arithmetically) calculated as a proportion of the sum in dispute; that does not make it (normatively) proportionate.

This government’s basic position on public services is to set charges at a level that ensures they ‘recover the full cost, but no more, of providing those services’. There is something strange about this: just how public is a service for which individual users pay full costs? The move to full cost recovery in the justice system is best explained by the fact that governments have, over the last several decades, increasingly conceived of legal claims as ‘private disputes’. The justice system has become, in Gove’s words, ‘a service, available for public use’; litigants are thus consumers who choose to use it. In the House of Lords debate on enhanced fees – attended by just eight of the 786 members – Lord Faulks tried to mollify critics with the plea that ‘litigation is very much an optional activity.’ When you see things in this way it’s natural to think that consumers should pay for the service, and hard to see why government shouldn’t make a bit of profit from it. ‘If the market can bear in the future a revision upwards,’ Gove told the Justice Committee, ‘then we’d be happy to do that.’

The expansion of this ideology has upended the way the justice system is financed. Once, taxes paid for court buildings and the salaries of judges; fees paid for the remaining administrative costs. In 1982, the government shifted the cost of maintaining court buildings to litigants; in 1992, it did the same for judicial salaries. All this was done without any formal announcement or debate. The ideological shift now runs so deep that Vara believes ‘no one could seriously argue’ that courts ought to be subsidised by the state. Serious or not, lawyers have long argued in favour of state subsidy. A government-commissioned report on court costs in 2010 concluded that the policy of full cost recovery is ‘fundamentally wrong’, and that general taxation should fund the courts. Submissions to the report were in ‘almost universal agreement’ with that view.

The government believes that only those who use the justice system should pay for it, because they’re obviously the ones benefiting. But litigants aren’t the only beneficiaries. The legal system creates rights and duties: to personal integrity, to private property, to have contracts fulfilled. Without these rights (and the shadow of the police and courts) all our lives would be much worse. Perhaps the greatest benefit the law brings is the prevention of harms that would otherwise be done. A justice system, therefore, not only benefits everyone, it especially benefits those who don’t need to go to court – which is one reason its cost should be spread across the whole population of taxpayers.

If courts should maximise anything it should be justice, not revenue. That counts against a policy of full cost recovery. But there is an additional problem with profiting from courts. For most people, resolving disputes through the state’s legal apparatus remains the last resort. Given the state’s monopoly power in public courts, profiting from their use is tantamount to exploitation. A select few have more options: should it suit their purposes, large commercial parties can bring their claim in New York, Dubai or any number of other jurisdictions. It wouldn’t be exploitative to profit from their use of the courts. But it is the members of this group who never have to pay more than £10,000. The cap was instituted because the government worried that a 5 per cent fee would deter them from litigating in London.

Gove promised a ‘one nation justice policy’. A regressive tax on victims of injustice doesn’t sit easily with that promise. His speech was clearly intended to appease lawyers, who were dismayed by the work of his predecessor. We should be cautious: talk is cheap. Real reform will cost money. But an inexpensive show of good faith would be the immediate repeal of the order.